(Podcast) Our labor, their fortunes: Billionaires capture Oregon’s wealth

Rolls of hundred dollar bills.

(Podcast) Our labor, their fortunes: Billionaires capture Oregon’s wealth

Rolls of hundred dollar bills.

(Podcast) Our labor, their fortunes: Billionaires capture Oregon’s wealth

Wealth inequality is at mind-boggling levels. OCPP Policy Analyst Tyler Mac Innis discusses how much of Oregon’s wealth is in the hands of a few billionaires, the factors driving economic inequality, and what we can do here in Oregon to confront inequality.

But how does Oregon compare to the rest of the country? Carl Davis, Research Director at the Institute on Taxation and Economic Policy, explains how Oregon stacks up in terms of wealth inequality and how federal tax policy is a key tool for reducing inequality.

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Juan Carlos Ordóñez (host): In the election season that just ended, Phil Knight, Oregon’s richest person, dumped more than $5 million into the governor’s race alone. This is pretty typical of what happened across the country. Media outlets reported a flood of cash from billionaires washing over this election. Billionaires have also been scooping up media assets, like the purchase of The Washington Post by Jeff Bezos a few years back, or Elon Musk’s recent takeover of Twitter. These are reminders that wealth begets power, and power begets more wealth.Today, the notion of America being the land of opportunity is mostly the stuff of fiction, because the reality is that we live in a state in nation marked by vast economic inequality.

Recently, the Oregon Center for Public Policy published what may be the first ever analysis of wealth inequality in Oregon. In the first half of today’s show, I speak with OCP policy analyst Tyler McInnis about the findings of that report and what we can do to confront the inequality here in Oregon. In the second half of the show, I speak with Carl Davis, research director at the Institute on Taxation and Economic Policy Itep. We discuss the larger national picture of wealth inequality and how federal tax policy is an essential tool in addressing inequality. Stay tuned.

Extreme wealth inequality in Oregon

Juan Carlos: Tyler of the Oregon Center for Public Policy recently released a report that may well be the first ever estimate of wealth inequality in Oregon. What was the main finding of that report?

Tyler Mac Innis: The main finding of the report is that wealth inequality in Oregon is extreme. And I should say this report we were able to produce thanks to our partners at the Institute on Taxation and Economic Policy, who recently just put out a report on wealth inequality in the states across the country. But we were able to work with them to get some more specific estimates of wealth inequality here in Oregon.

And the reality is wealth inequality is at mind boggling levels when you get down into the numbers. We found that in Oregon, the three billionaires that call Oregon home together have about twice as much wealth as the bottom half of all Oregonians. So I think that that really speaks to just the extreme levels of wealth inequality that we here we see here in our state.

Juan Carlos: Let me repeat that fact. Three billionaires have double the amount of wealth that half of all Oregonians possess.

Tyler: Three billionaires. That’s right.

Juan Carlos: Who are these three billionaires?

Tyler: There’s, of course, Nike co-founder Phil Knight. There’s also Columbia Sportswear CEO Tim Boyle and the CEO of Dutch Brothers Coffee, Travis Boersma. And I should point out that Phil Knight alone holds more wealth than the bottom half of all Oregonians. So he really stands out among the top.

Juan Carlos: So we’re going to dive deeper into the findings of the report. But before we do that, why don’t we define a key term: wealth? What is wealth? And maybe you can also say about how it is different than income, another measure of economic well-being.

Tyler: Sure. So wealth refers to the sum of all the assets that a person owns minus all of their debts. So when we talk about assets, we’re talking about things like real estate holdings that they might have, stocks and other financial instruments, ownership of businesses – all of those things taken together minus any debts a person has collectively makes up their wealth. That’s different from the other measure of economic well-being that you mentioned, income, which more refers to how much a person earns in a given year.

Juan Carlos: So what else did the report find? What are some of the other key takeaways?

Tyler: We found that the inequitable distribution of wealth isn’t just confined to those three billionaires in Oregon. The top 10% of Oregonians collectively own more than $1.2 trillion in wealth, which is more than 75% of all wealth in the entire state. Together, that top 10% – so that richest one in every ten Oregonians – together they own more than three times the wealth as the bottom 90% of Oregonians. I think that really paints a picture of how skewed wealth is towards folks at the top.

Juan Carlos: So maybe one way that folks can understand this figure is that if you are in Oregon, in a room of ten people that sort of represent the entire state, one person in that room would own three quarters of all the stuff that they together own. What about differences by race and ethnicity when it comes to who owns the wealth in our state?

Tyler: This analysis doesn’t include race and ethnic breakdowns for here in Oregon, but we do know that that wealth is in equitably distributed nationally by race. The typical white household in the United States has about $187,000 in wealth, compared to just $32,000 in $14,000 for Latino and Black households, respectively. So we see these stark differences between white households and households of color, you know, across the country. That’s something that we know to be true.

I think it’s also important to note that we know, here in Oregon, that our state has a deeply racist legacy when it comes to wealth and wealth accumulation. Oregon is a state where land was stolen from Indigenous communities and Black individuals were barred from land ownership or owning property. Property ownership is one of the primary wealth generators that we have here in our country, and we have communities of color who were specifically barred or prevented from owning property or had their property taken from them.

Juan Carlos: So we’ve been talking about wealth inequality, but income inequality, that other measure of economic well-being, is also huge. And you recently put out a paper looking at inequality when it comes to income. What was the main finding of that report?

Tyler: Again, some pretty stark figures in the most recently available data that we have. So the data that we were using for this report looked at tax filing data from 2020, and it’s the first year of the pandemic. And what we found was that the gap between those at the top and those at the in the middle has never been wider.

We found that the average income of the top 1/10 of 1% of Oregonians, so the richest one in every thousand Oregonians, soared to nearly $5.6 million in 2020. That same year, The Oregonian in the middle, or the median Oregonian, took home about $39,000. We have decades now of inequality data here in Oregon. And 2020 was the worst year on record between that gap between the folks at the very top and the Oregonians in the middle.

Another thing that we looked at was how much time would it take that Oregonian in the middle to amass the amount of income that the folks in the top 1/10 of 1% took home in a single year in 2020. And what we found is it would take more than 143 years. We know that the typical Oregonians works incredibly hard and there’s there’s no rhyme or reason for folks at the very top to be making 143 times as much money as as they do in a given year. It’s not that they’re working 143 times as hard, or they are at 143 times as creative.

Juan Carlos: So let’s switch gears here and talk about how we arrived at the situation, what the causes are behind such levels of extreme wealth and income inequality. What would you say are the main factors?

Tyler: Well, to put it simply, I think a key reason for this, these levels of extreme inequality, is that we have an economic system that’s designed to benefit those at the top at the detriment of the vast majority of the rest of us. This is something that isn’t by accident. It’s happened over several decades, and it happens in many different forms.

But let me mention a few of the most important ways that we see the system as being rigged in order to benefit the wealthy. One is the decline in unionization caused by weakening of labor laws and attacks on unions. It’s been encouraging to see the wave of organizing and unionization that’s happening across the country in recent years. But if you look at the trends over the last many decades as inequality has grown, we’ve seen unionization decline for years and years and years.

It’s also important to think about tax policy, especially at the federal level. We’ve seen whether it was in the eighties, the early 2000s, most recently in the late 20 teens, we’ve seen massive tax cuts for the folks at the very top. So tax policy is a major driver here.

We’ve seen major disinvestment in the public sector here in Oregon. Know we have so many public structures that need stronger investments, things like childcare, for instance. We need much stronger investments in these kinds of systems to ensure that working families are able to to make ends meet.

And in our political system, money is power. And so you know, when we think about these extreme levels of wealth inequality, wealth begets power. Power begets more wealth. And we see this vicious, vicious cycle playing out over and over again.

Juan Carlos: What’s the harm that flows from all this vast inequality? How does it affect the lives of ordinary folks?

Tyler: It’s a great question. So for folks who have little or no wealth or even negative wealth, folks of, you know, incredible levels of debt, it means constant economic struggle and anxiety. You know, wondering where you’re going to find the money to pay the bills next month. That has real effects on people’s everyday lives. Researchers have looked into this and they’ve linked that kind of economic inequality to poorer health outcomes, reduced life expectancy for folks on the bottom end of the economic ladder. So in other words, inequality is killing us.

We we find reduced social mobility. You know, for children who are born into poverty, it’s much harder for those children to rise above it, to find their way out of that circumstance. And so we start to see over many generations, we start to see people’s lives almost, you know, written for them in a sense.

And, you know, thinking even more broadly, research has found that inequality is bad for our economy. It slows down our economic growth. It leads to less innovation in the economy. And so there’s also, you know, real economic and business interests here at doing something about inequality more broadly.

Juan Carlos: So what should we ultimately do about this vast economic inequality? What what are the some of the solutions that can address the problem?

Tyler: Yes, we’ve talked about a lot of the there are many, many causes for this. Right. So there are many solutions that we need to bring to the table in order to fully rectify this. This is one of the things that, you know, we at the Oregon Center for Public Policy think about a lot. And over the last several years have put together what we call the Action Plan for the People that really lays out what we think we can be doing here in Oregon to to be building this more prosperous state that we envision in the Action Plan.

We lay out three areas of work that we see as central to addressing inequality in our states. The first is boosting worker power. We need to make it easier for workers to be able to organize, to have better democracy in the workplace. We know that through more worker power, workers will likely see increases in their wages, better benefits.

Another thing we need to be doing is raising taxes on the wealthy and the rich. There’s room clearly to be raising taxes here. I mean, the numbers that we’ve talked about today spell that out. We are seeing incredible, incredible gains for the folks at the very top at the expense of the rest of us. And so we need to be looking at ways to to tax those individuals to ensure that our state’s prosperity is shared more broadly.

And last, we need to be finding ways to ensure that Oregonians can meet their basic needs. And so looking at a variety of ways to boost income people’s households, finding ways to get people cash so they can better afford the things that they need to get by. So one of the things that we think would be really critical to doing that here in Oregon is looking at a state child tax credit.

We saw that the expanded federal child tax credit in 2021 was essential to helping families get by as as we were kind of navigating through the pandemic, that cash was really, really critical. And so Oregon should be looking to to replicate that success here. We’re going to be putting forward an idea for an Oregon Kids’ Credit. That’s something that would put cash in the hands of families with children to better enable them to make sure that the rent is paid to ensure that they’re keeping food on the table, provide those basics for their families.

So those are kind of the areas that we see as primary policy areas that Oregonians should be looking to rectify this broader question of inequality.

Juan Carlos: Tyler, any final thoughts you want to share with us regarding wealth inequality and the damage that it causes Oregonians?

Tyler: This kind of inequality is not natural. We found our way to this place of extreme inequality in our state as a result of bad public policies. And so we need better public policies to rectify that situation and lead us towards a more prosperous state.

The geographical distribution of wealth and the role of federal tax policy in curbing inequality

Juan Carlos: If you’re just joining us, that was Tyler Mac Innis, policy analyst with the Oregon Center for Public Policy, discussing just how extreme wealth inequality is here in Oregon. But how does Oregon, compared to other states when it comes to inequality? And what can we do at the national level to deal with the fundamental problem that vast inequality poses? I discussed this with Carl Davis, research director at the Institute on Taxation and Economic Policy.

So, Carl, earlier this show, I discussed with my colleague Tyler Mac Innis the extreme levels of wealth inequality in Oregon. But I’m wondering, how does Oregon compare to other states in terms of wealth inequality?

Carl Davis: Oregon is pretty typical in a bad way. And, you know, the problem is we see an intense concentration of wealth in the hands of a very small number of people. This is a nationwide problem. And Oregon is right in the center of it.

Juan Carlos: The Institute on Taxation and Economic Policy recently released a paper discussing the geographic distribution of wealth in our nation, and it’s more concentrated in some states than others. Can you tell us where wealth is concentrated around the country and what explains why wealth is more concentrated in some states versus other states?

Carl: The number one thing we found is that we see these extreme concentrations of wealth everywhere. There is no state that doesn’t have an immense amount of inequality. But at the same time, we also found some some pretty big differences. Really, there were some surprising states: Arkansas, Nebraska, Wyoming. You know, for a lot of folks, those might not be the first states that come to mind when you think of, you know, a really wealthy state.

And, you know, as it happens, what’s going on is that we’ve seen a very small number of people become so extraordinarily wealthy that you can have just a handful of billionaires, sometimes even just one billionaires, skew an entire state – the results in terms of how unequal it is, how much extreme wealth there is. So if you have, you know, a very small number of libertarian leaning billionaires moving to Wyoming, for example – very, very small number of people in the big picture. But they have such an incredible amount of wealth that Wyoming is actually one of the most unequal states in the nation when you look at these extreme levels of wealth. In Arkansas, the Walton family fortune from Wal-Mart fame – it’s just clear as day and the data just stands out and makes Arkansas one of the states with intense amounts of extreme wealth. And then in Nebraska, it’s a similar story with Warren Buffett.

California and New York still have some of the most intense amounts of extreme wealth of any state in the country. And there were some pretty obvious reasons for that. There’s the tech industry in Silicon Valley in California, cranking out immense fortunes. Or Wall Street in New York. Of course, New York actually stands out as the most unequal state because of how much wealth is being generated on Wall Street.

Juan Carlos: And what’s the harm that you see coming from such extreme concentrations of wealth?

Carl: Well, first, I mean, obviously, there’s an inequality in economic outcomes, but there’s also a lot of inequality even in economic opportunity. People in this country aren’t getting started on the same footing in life or even close to it at this point. You have an extremely privileged class that’s able to build their wealth over time and protect it largely, of course, through influence on our public policy making process.

Extremely wealthy families unquestionably have an outsized amount of control over our democratic process through campaign finance, through ownership of the media. Any number of ways they’re able to exert influence on the policy outcomes that that we could be pursuing to curb all this inequality. And they’re able to stand in the way of that.

And, you know, of course, I’m also very concerned about the racial dimensions to this inequality. We weren’t able, in our most recent study, to break down the racial dimensions of this extreme inequality state by state. But we do have good data on what the racial wealth gap looks like nationally, and it’s enormous. And frankly, it’s not going to fix itself.

Juan Carlos: So your report points out that at the federal level, wealth is taxed very little, very lightly. Can you explain that point? Can you flesh it out?

Carl: First thing I’ll point out is that we have very little in the way of direct taxes on wealth in this country. Really, the closest thing we have are local level, real estate, property taxes, you know. And of course, real estate is certainly a form of wealth. It just so happens to be a form of wealth that tends to make up a larger share of the portfolio of middle income families. Sometimes lower income families as well, when they’re fortunate enough to own their homes.

So we have a system where the wealth that’s more likely to be owned by middle income families is tending to be taxed under these real estate property taxes. And then the wealth that tends to be owned by extremely wealthy families, which is corporate stock, it’s other business equity, that wealth is not being taxed. There is no kind of annual wealth tax on that form of wealth.

Carl: So we’re picking and choosing what wealth is being taxed. That’s one problem. Another problem is what’s happened to our estate tax. This is a tax specifically on the transfer of wealth from one generation to the next. It’s supposed to curb this extreme buildup of wealth over time. And it used to be relatively effective at doing that. But what’s happened is that lawyers and accountants have become increasingly sophisticated over time in the tax avoidance schemes that they’re dreaming up, to the point where the estate tax has been hollowed out so much that it’s just about an optional tax for folks now. It’s only supposed to apply to a very, very small number of extremely wealthy families. And we’re finding in a lot of cases, it’s not even applying to them.

The other thing going on at the federal level is we have an income tax in place and at almost every turn it’s treats income derived from wealth more favorably than it treats income that’s earned from someone’s work.

So at the federal level, you have lower tax rates on capital gains income, which is income that wealthy people overwhelmingly receive when they sell certain assets and they sell stock, for example. You have those lower rates. You also have these built-in preferences where a large amount of capital gains income ends up never being taxed at all.

You know, if you purchase an asset, hold it for several decades, watch its value grow and grow and grow. And it produces an enormous amount of of income and wealth for your family. And you’re so wealthy, you actually never need to end up selling it in your lifetime. And instead you pass it on to your heirs. What happens at that moment when the stock passes from one generation to the next, all that income generated during the original owners lifetime, it just vanishes into thin air. It’s never taxed. And so you have all these capital gains, all this investment income, that’s just accruing totally outside of the tax system. It doesn’t get taxed at all. This is known as the stepped up basis loophole.

Juan Carlos: So let’s talk about what we can do about this massive problem that we have. And in recent years, there’s been a lot of good and interesting ideas on how to tax wealth. Can you give us some examples that you particularly like?

Carl: I think there’s a lot of merit in, say, like a federal nationwide wealth tax. I think that would have one of the biggest impacts in terms of curbing this extreme wealth, reducing inequality and raising a really, you know, significant amount of revenue that we can put toward more important priorities that grow economic opportunity for everyone. I think there’s a lot to be done in our federal income tax to strengthen our taxation of income from wealth. So close the stepped up basis loophole, for example, make sure that that those gains get taxed at some point.

You know, even better than that would be to pursue something like what’s known as mark-to-market taxation. You know, when most of us earn a paycheck, we’re having withholding come out of our paycheck, you know, every week or every other week we pay our taxes regularly. When extremely wealthy families, though, are generating income off their assets, they may not pay tax for years or decades or again, maybe never. And the idea behind mark-to-market taxation is to move toward a system where for folks with very large levels of wealth, they would start to pay tax every year instead of every few decades. Because if you look at, for example, like what shows up on Jeff Bezos’ tax forms versus what his true income is, how much his wealth is really going up, there’s almost no connection there. Our income tax code is not synched up with the realities of extremely wealthy people.

Juan Carlos: It’s interesting that you mentioned Jeff Bezos. There was a ProPublica analysis released not that long ago showing that folks like Jeff Bezos and Elon Musk haven’t paid any taxes, federal taxes in some years – which is kind of amazing, but maybe not surprising. How much money would such reforms raise and how could we use that money in a better way, rather than continuing to funnel it to billionaires and growing their fortunes even more?

Carl: You’re looking at trillions federally and billions at the state level. There’s there’s a huge revenue potential here. I think we have a clear need for more revenue to begin addressing some really urgent challenges, like around childcare affordability, college affordability, the climate crisis, tackling child poverty. You know, we have solutions to all these problems. The question is just how are we going to pay for it?

There’s a moral case to be made for addressing child poverty through things like the child tax credit, for example. And our recent experience with it has proven that child tax credits can have a dramatic impact on lessening child poverty. But even just if you’re looking at our long run growth potential as a nation, and if you’re wanting to promote economic opportunity, living in a country with a lot less child poverty is clearly going to it’s going to put our country on much stronger footing.

When you have kids who are set up to succeed, where there’s less stress in the home, there’s less uncertainty about the next meal or about paying the electric bill – if you can do those kind of things to create a better economic reality for working families and for families with kids, it just sets up the next generation to succeed and makes our country so much stronger. So I think that’s where we need to be prioritizing our efforts.

Juan Carlos: Any final thoughts you want to share with us about wealth inequality in our country and what we can do about it?

Carl: This is a problem that’s not going to solve itself. If we’re going to get a grip on this runaway inequality, we need tax reform that’s focused on asking more from people with extraordinary fortunes, so that so that we can promote economic opportunity and more broadly shared prosperity.

Juan Carlos: Well, Carl, thank you very much.

Carl: Yeah, absolutely. Thank you.

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Written by staff at the Oregon Center for Public Policy.

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